View Full Version : Fed Funds and Discount Rate Cut by .50 Each
Bronco_Beerslug
09-18-2007, 02:15 PM
Fed rate cuts just announced. Fed funds rate to 4.75% and discount rate to 5.25%.
Markets are seeing gains of 200%+ right now and rising.
Garcia Bronco
09-18-2007, 02:18 PM
Nice....two weeks after I bought a house...great. Still though...this is good.
Bronco Bob
09-18-2007, 03:22 PM
Nice....two weeks after I bought a house...great. Still though...this is good.
Just curious, what is the current fixed rate interest on a 15 year loan?
defenseman
09-18-2007, 06:03 PM
I'm still not sure this is going to be enough.....short term maybe, but I'm thinking it's gonna get worse out there.....dman
c_lazy_r
09-18-2007, 06:20 PM
Another attempt to artificially inflate the markets, IMO.
I agree, Dman, it is only a short-term bandaid.
It will mean a short-term pop, but our problems are deeper than this. I wish for teh best, but our debt, and those that are carrying our debt freak me out.
Just curious, what is the current fixed rate interest on a 15 year loan?
"North Palm Beach, Fla. -- Sept. 18, 2007 (Bankrate.com) -- Rates on 15-year fixed mortgages in the United States rose 6 basis points to 5.70 percent on Tuesday, according to Bankrate.com's daily Your Best Interest report. A basis point is one-hundredth of a percent. The mortgages in the survey had an average of 0.63 discount and origination points."
When we bought out house about 12 yrs. ago we had a 7% fixed rate.
We refinanced a couple years ago to a 15yr. fixed rate of 5.43 and put a new roof, siding and windows on the house
Bronco Bob
09-18-2007, 09:49 PM
"North Palm Beach, Fla. -- Sept. 18, 2007 (Bankrate.com) -- Rates on 15-year fixed mortgages in the United States rose 6 basis points to 5.70 percent on Tuesday, according to Bankrate.com's daily Your Best Interest report. A basis point is one-hundredth of a percent. The mortgages in the survey had an average of 0.63 discount and origination points."
When we bought out house about 12 yrs. ago we had a 7% fixed rate.
We refinanced a couple years ago to a 15yr. fixed rate of 5.43 and put a new roof, siding and windows on the house
Yeah, when I bought my house it was a 7.5% fixed rate 30 year loan
and I refinanced it a couple three years back at 5.5% fixed rate 15 year.
Saved hundreds of dollars a month in mortgage payment. Decided to
go out and buy a new pick-up with all the money I was saving.
Nice....two weeks after I bought a house...great. Still though...this is good.
You sure its good? Rates for going deeper in debt may be lower but this move all but assures your dollars will be worth far less. Don't plan a European vacation anytime soon unless you just signed a multi million dollar contract or get paid in Candos. In the final analysis the FED can play with rates all they want but Mr Market will set the rates based on risk. The inflation tax is going to eat your lunch........dinner and breakfast too.
Garcia Bronco
09-18-2007, 11:37 PM
You sure its good? Rates for going deeper in debt may be lower but this move all but assures your dollars will be worth far less. Don't plan a European vacation anytime soon unless you just signed a multi million dollar contract or get paid in Candos. In the final analysis the FED can play with rates all they want but Mr Market will set the rates based on risk. The inflation tax is going to eat your lunch........dinner and breakfast too.
I'll try to live with it.
mosca
09-19-2007, 12:10 AM
Yay ... another short term solution for a much bigger problem, a "solution" that will only add to what was wrong with the economy in the first place. May as well flood the market with more money and devalue what's already out there. As long as it convinces people to keep borrowing, right?
Taco John
09-19-2007, 12:32 AM
What a shame. Every American was hurt today. Take a look at the dollar's value plunge on open markets thanks to this...
http://www.chiefsplanet.com/BB/attachment.php?attachmentid=73085&stc=1
alkemical
09-19-2007, 01:23 AM
well TJ - greenspan just said the Euro is starting to become "preferred"....
TheDave
09-19-2007, 01:28 AM
Yes it was a band-aid... unfortunately it was one that had to happen. Hopefully this will help the the Real Estate market, at least for the short term.
ak1971
09-19-2007, 03:31 AM
Yes it was a band-aid... unfortunately it was one that had to happen. Hopefully this will help the the Real Estate market, at least for the short term.
no..gold is going to be at 1300 and Im moving to baja with my tank
Bronco_Beerslug
09-19-2007, 10:44 AM
What a shame. Every American was hurt today. Take a look at the dollar's value plunge on open markets thanks to this...
http://www.chiefsplanet.com/BB/attachment.php?attachmentid=73085&stc=1
Geeeezus! You're posting a two day chart to say the world is going to hell?
Here's a little better indicator of the dollar (2 years against the Euro).
Average (737 days): 0.78495
High: 0.85900
Low: 0.71510
What the Fed is doing is trying to alleviate some of the housing and credit fisaco that is/will affect every American if it continues to disintegrate. A recession is pretty likely and has been for sometime, softening the impact of one helps everyone.
Taco John
09-19-2007, 01:32 PM
How does it help those who have been responsible with their money? Devaluing the savings accounts of people doesn't help them at all. It just makes people who are responsible pay an invisible tax to bail out those who are irresponsible. All they did was take money out of people's pockets in order to temporarily bail out people who created this mess in the first place.
A Fiat currency system is socialism. Socialism will always fail under the burden of the debt it creates.
Bronco_Beerslug
09-19-2007, 02:29 PM
How does it help those who have been responsible with their money? Devaluing the savings accounts of people doesn't help them at all. It just makes people who are responsible pay an invisible tax to bail out those who are irresponsible. All they did was take money out of people's pockets in order to temporarily bail out people who created this mess in the first place.
A Fiat currency system is socialism. Socialism will always fail under the burden of the debt it creates.Talk about fearmongering and propaganda! The Fed didn't devalue anyone's saving accounts by reducing rates and the dollar didn't just devalue starting with their decision to reduce rates.
alkemical
09-19-2007, 02:36 PM
food for thought:
http://en.wikipedia.org/wiki/Inflation_tax
An inflation tax is a metaphor for the economic disadvantage suffered by holders of cash and cash equivalents in one denomination of currency due to the effects of inflation, which acts as a hidden tax that subtracts value from those assets.
Inflation tax hurts middle class and low-income people the most. [1]
When governments raise revenue by printing notes and bills they increase the amount of money available in the economy. Through a change in real money balances this causes inflation. Financing expenditure in this way is called seignorage and the effect of increasing the money supply and causing the holders of money to pay an inflation tax is the most obvious cost of inflation.
If the annual inflation rate in the United States is 5%, one dollar will buy $1 worth of goods and services this year, but only 95¢ the next year; this has the same effect as a 5% annual tax on cash holdings.
Governments are almost always net debtors (that is, most of the time a government owes more money than others owe to it). Inflation reduces the relative value of previous borrowing, and at the same time it increases the amount of revenue from taxes. Thus it follows that a government can improve the debt-to-revenue ratio by employing inflationary measures.
However, if the government continues to sell debt, by borrowing money in exchange of debt papers, these debt papers will be affected by inflation: they will lose their value, and therefore they will become less attractive for creditors, until the government will not find any willing to buy debt.
An inflation tax does not necessarily involve debt emission. By simply emitting currency (cash), a government will induce liquidity and may trigger inflationary pressures. Taxes on consumer spending and income will then collect the extra cash from the citizens. Inflation, however, tends to cause social problems (e. g., when income increases more slowly than prices).
Tax on the inflation tax"
Although not meant by the term "inflation tax", a related effect is the tax on interest and investment "income" when the tax is levied against the nominal interest rate or nominal gains. For instance, if someone buys a bond with 6% interest and inflation is 4%, their "real" interest is 2%. If, however, they are taxed 25% of the 6% interest "income", or 1.5%, this can be thought of as composed of a tax on real income (0.5%) and a tax on inflation (1.0%). The same principle applies to capital "gains" taxes not adjusted for inflation. In any case, this "tax on the inflation tax" is essentially equivalent to a tax on holdings ("wealth tax") equal to the nominal tax rate times the inflation rate (in example above, 25% of 4% inflation equals 1.0%.) This "property tax" can even apply to non-monetary assets as well as money earning interest. Thus, money itself is subject to both the inflation tax and the tax on the inflation tax, while other assets, on which nominal profit or gains taxes are imposed, are subject only to the tax on inflation.
Another unfortunate effect of this tax is that even inflation-indexed bonds carry inflation risk, as the inflation compensation is taxed.
c_lazy_r
09-19-2007, 03:07 PM
Geeeezus! You're posting a two day chart to say the world is going to hell?
Here's a little better indicator of the dollar (2 years against the Euro).
Average (737 days): 0.78495
High: 0.85900
Low: 0.71510
What the Fed is doing is trying to alleviate some of the housing and credit fisaco that is/will affect every American if it continues to disintegrate. A recession is pretty likely and has been for sometime, softening the impact of one helps everyone.
Is this really going to "soften" the impact or just delay the inevitable? IMO, when there is a problem to face, you might as well get it over with versus procrastinating.
Bronco_Beerslug
09-19-2007, 03:18 PM
Is this really going to "soften" the impact or just delay the inevitable? IMO, when there is a problem to face, you might as well get it over with versus procrastinating.It's going to soften the downturn if rates are lowered again and they probably will be which will bring Americans back into the real estate markets (buying homes again).
TheDave
09-19-2007, 03:40 PM
It's going to soften the downturn if rates are lowered again and they probably will be which will bring Americans back into the real estate markets (buying homes again).
With forclosure numbers up about 113% they better get people buying homes quickly....
ak1971
09-19-2007, 04:15 PM
With forclosure numbers up about 113% they better get people buying homes quickly....
bring back the 6mo LIBOR loan damn it!
TheDave
09-19-2007, 04:55 PM
bring back the 6mo LIBOR loan damn it!
You damn subprime guys are all the same....;)
alkemical
09-20-2007, 11:32 AM
alan greenspan on 'the daily show'
http://www.ifilm.com/video/2896263
Rohirrim
09-20-2007, 11:40 AM
Sooner or later, Americans are going to have to learn to pull in their belts and live within their means - the way our grandparents did - and before the bs credit world made "saving" a dirty word. At some point, we'll figure out that greed, for want of a better word, is NOT good. We might even come to the conclusion that being a human being actually means more than just being a consumer.
alkemical
09-20-2007, 11:44 AM
Sooner or later, Americans are going to have to learn to pull in their belts and live within their means - the way our grandparents did - and before the bs credit world made "saving" a dirty word. At some point, we'll figure out that greed, for want of a better word, is NOT good. We might even come to the conclusion that being a human being actually means more than just being a consumer.
oh i fully agree Ro. I live really simple compared to alot of my friends. I decided some time ago to live below my wages. I decided to not have any loans on my vehicles, etc. A simple thing: When buying a car with a loan you have to deal with depreciation (of vehicle), interest (on the loan) and inflation. When i added those up, i felt like borrowing money for a vehicle was a horrible "investment". At least if you buy it in cash, you are only getting depreciation (which is bad enough!).
but that's just an example that i looked at for myself.
Rohirrim
09-20-2007, 11:58 AM
It occured to me that many younger people today are into this movement called "sustainable economies" that don't use as much resources. Our parents lived in such an economy. Not completely, but in large part. They bought a TV, a refrigerator, a vacuum cleaner, a car - whatever - and they might keep it their entire working lives. Those things were manufactured in the U.S. and they were made to last. There were shops in every community where things like appliances were actually fixed, when and if they broke.
When the credit mongers came along, they marketed the idea that consumerism is what would make people happy. You can have it all now. Why make a good vacuum cleaner. Make a cheap piece of crap in China, use it for a year, then throw it out and get another one. The dream of unlimited growth was born.
alkemical
09-20-2007, 12:01 PM
It occured to me that many younger people today are into this movement called "sustainable economies" that don't use as much resources. Our parents lived in such an economy. Not completely, but in large part. They bought a TV, a refrigerator, a vacuum cleaner, a car - whatever - and they might keep it their entire working lives. Those things were manufactured in the U.S. and they were made to last. There were shops in every community where things like appliances were actually fixed, when and if they broke.
When the credit mongers came along, they marketed the idea that consumerism is what would make people happy. You can have it all now. Why make a good vacuum cleaner. Make a cheap piece of crap in China, use it for a year, then throw it out and get another one. The dream of unlimited growth was born.
i'm doing my part to use up all the parts for a 1990 broncos II :)
c_lazy_r
09-20-2007, 01:03 PM
It's going to soften the downturn if rates are lowered again and they probably will be which will bring Americans back into the real estate markets (buying homes again).
Is the creation of more credit ultimately going to "soften" the blow, though? Seems to me that it's only adding more blocks to the pyramid. Pretty soon you don't have enough fingers to stop all the leaks in the dam...
alkemical
09-20-2007, 01:16 PM
http://mparent7777-2.blogspot.com/2007/09/us-regulators-give-fannie-freddie-scope.html
WASHINGTON (Thomson Financial) - US federal housing regulators have modified, though not significantly increased, the mortgage investment caps for Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ) so that they can invest 20 bln usd or more in sub-prime mortgages.
The two mortgage securitization and investment companies will have the caps on their investment portfolios increased to 735 bln usd from 728 bln usd for the third quarter of this year. These caps can also be expanded by 1.0 pct in the fourth quarter, although the caps will still be subject to 2.0 pct annual growth.
The Office of Federal Housing Enterprise Oversight (OFHEO) also announced changes in the accounting standards for determining the size of the investment portfolios would allow Fannie and Freddie more flexibility in managing their mortgage portfolios. OFHEO will use the value of the original loan amounts, not the fluctuating market value of the loans, to determine whether Fannie and Freddie are under their portfolio caps.
Bronco_Beerslug
09-20-2007, 01:16 PM
Is the creation of more credit ultimately going to "soften" the blow, though? Seems to me that it's only adding more blocks to the pyramid. Pretty soon you don't have enough fingers to stop all the leaks in the dam...It remains to be seen but with over two million subprime loans adjusting over the next two to three years it probably will help many of those homeowners and enable more people overall to buy homes.
c_lazy_r
09-20-2007, 01:22 PM
It remains to be seen but with over two million subprime loans adjusting over the next two to three years it probably will help many of those homeowners and enable more people overall to buy homes.
Slug, you're bright guy, doesn't this look like a huge ponzi scheme to you at all?
Bronco_Beerslug
09-20-2007, 01:32 PM
Slug, you're bright guy, doesn't this look like a huge ponzi scheme to you at all?There are a whole lot of people out there that are more informed and brighter than me when it comes to world economics and most of them believe that government manipulation of economies is not only acceptable but essential in today's world.
Dollar devaluation is a serious concern though that is happening no matter what the Fed does or doesn't do.
Willynowei
09-20-2007, 01:54 PM
Bah, I don't know. You've got creditors defaulting on loans b/c people can't pay them back, you get a credit crunch and a frozen market and the Feds cut rates?
I wonder if its smarter to just stop the bleeding here, what if they raised rates, they'd **** everyone now but atleast we'll be on the upswing to recovery quicklier.
Iunno, for the rest of us it looks like a good chance to make a quick buck on the news and run the **** away before the sky crashes down on all of us again.